Can donors prevent aid misallocations? Evidence from Chinese and World Bank aid

• Published in: World development Vol. 186; p. 106811
• Main Authors: André, Pierre, Maarek, Paul, Tapo, Fatoumata
• Format: Journal Article
• Language: English
• Published: Elsevier Ltd 01.02.2025; Elsevier
• Subjects: Africa; Aid; Clientelism; Economics and Finance; Ethnic favoritism; Humanities and Social Sciences; Pork barrel politics; O12; Clientelism; H41; H52; Pork barrel politics; Ethnic favoritism; Africa; Aid; O10
• ISSN: 0305-750X
• DOI: 10.1016/j.worlddev.2024.106811

We estimate the extent to which international aid projects are subject to favoritism using differences in differences and RDD estimates based on presidential transition dates. We compare two different sources of aid, China and the World Bank, and two different types of favoritism based on the president’s region of birth or ethnic group. Consistent with the literature, we find that Chinese aid is massively targeted to the region of birth of new presidents. However, we also find evidence of a less visible and less intense form of favoritism in World Bank aid: it targets areas that are co-ethnic with a new president, without following major regional administrative boundaries. This is consistent with a better control of the World Bank aid. Moreover, the political economy of World Bank aid favoritism appears to be more complex: World Bank aid favoritism is more intense in dictatorships, when Chinese aid is more abundant, and in countries that have historically received more World Bank aid. •We estimate the extent to which international aid projects are subject to favoritism and compare two different sources: Chinese aid and World Bank aid.•We highlight two very different patterns of favoritism, suggesting better (but not perfect) control by the World Bank.•We find that Chinese aid is heavily targeted to the birth regions of new presidents.•We also find evidence of a less visible and less intense form of favoritism in World Bank aid: it targets areas that are co-ethnic with a new president without following major regional administrative boundaries.•This pattern of World Bank aid disappears with democratization, in contrast to Chinese aid, is present only when Chinese aid is present in the country, suggesting donor competition, and is observed only when there are pre- existing relationships with the World Bank.